Here in Philadelphia the water bills are split into two line items, usage and storm water collection.

We know there need, want and interest, we have collected all the info, they have been well informed and educated of the process, it's now all but a functionary call, to complete process items. 

I collected rent (with increases ) for those 4 years .

Then comes collections.

Assuming you do not get whacko judge, the unpermitted unit has no impact on collecting rent or the eviction process.  

This is an exception under all insurance policies so the next question is even if successful with a claim how confident are you to ever collect from this seller without insurance cooperation? 

They have a mental list of hard to collect rent addresses and they may help connect you and the owner. 

Also in terms of collecting rent, would I need a lease agreement, and account for this during tax season.

I had 98% rent collections through moratorium

Im paying X on the HELOC, but collecting XPLUS on the note.